Markets Report - 26 June 2023

A daily breakdown of the markets for the 26th June 2023, provided to you by Sterlex.

🇪🇺💶The ECB's forum is entitled “Macroeconomic stabilisation in a volatile inflation environment.” Many prominent central bankers, including FOMC Chairman Jerome Powell and Bank of England President Andrew Bailey, will be speaking at this event later in the week. Regarding the ECB, investors are still anticipating another 25 bps rate hike in July. Traders also seem reluctant to place aggressive bullish bets around the shared currency in the wake of Friday's disappointing release of Eurozone PMI prints, which deepens a policy dilemma for the European Central Bank (ECB). After two consecutive daily retracements, the Euro (EUR) has regained some stability and rebounded from last week's lows near 1.0840 against the US Dollar, with its initial target being the key 1.0900 level. Market participants are expected to closely monitor the annual ECB Forum on Central Banking in Sintra, Portugal, as well as a series of speeches by ECB officials, including President Christine Lagarde.

🇬🇧💷GBP/USD came within a touching distance of 1.2700 during the Asian trading hours on Monday but managed to stage a rebound toward 1.2750. United Kingdom’s headline inflation landed at 8.7% as rising prices for recreational cultural goods and services, air travel, and second-hand cars were sufficient to offset the marginal decline in historic high food inflation and falling gasoline prices. Last week, hotter-than-expected headline United Kingdom’s headline inflation and fresh highs in the core Consumer Price Index (CPI) forced the Bank of England (BoE) to announce a fat rate hike of 50 basis points. The British government also asked companies to bring down profit margins to tame sticky inflation, which might help trim fears of a bleak economic outlook. Headline inflation remained higher than anticipation as upbeat sales of second-hand automobiles offset a decline in energy prices. The Pound Sterling (GBP) is aiming to stretch recovery as the United Kingdom’s government is looking to inculcate fiscal tools in the battle against stubborn inflation.

🇺🇸 🏦On Monday, the USD Index (DXY), which monitors the performance of the greenback against a basket of its primary rival currencies, began the week on a weaker note, retreating from the previous week's highs beyond the 103.00 level. On another front, speculative net longs in the USD climbed to levels last seen in late January in the week ended on June 20 as per the latest CFTC Positioning Report, as investors were digesting the FOMC gathering on June 14. Investors are still predicting a 25 bps rate hike by the Federal Reserve at the July 26 event, while the US money market show some consolidation in yields across the curve following recent peaks. As a result of some decent recovery in the risk-linked market, the index is currently experiencing some selling pressure, causing it to retreat to the 102.70 level, while market participants take profits after the two-day strong rebound at the start of the week.